Rafaella Apparel begins Dutch auction tender offer for 11¼% notes

By Angela McDaniels

Tacoma, Wash., Feb. 22 - Rafaella Apparel Group, Inc. has begun a modified Dutch auction tender offer for its 11¼% senior secured notes due 2011, according to a company news release.

The company will purchase $17,975,000 to $36.38 million principal amount at maturity of notes, provided that it will not pay more than $19.1 million in total. This cap excludes accrued interest.

As of Feb. 22, there was $71,861,000 principal amount at maturity of the notes outstanding. The minimum tender amount and the maximum tender amount represent approximately 25% and 50.6% of the outstanding amount, respectively.

Holders who wish to tender should specify a purchase price of between $525 and $600 per note. The company will also pay accrued interest up to but excluding the purchase date.

Rafaella will choose a purchase price within the price range that will allow it to purchase a principal amount at maturity of the notes that is no less than the minimum tender amount and no greater than the maximum tender amount and does not exceed the $19.1 million maximum total purchase price.

The company noted that it may choose not to select the highest purchase price at which notes are tendered within the price range, even if selecting that price would allow it to remain within the limits described above.

Notes may be subject to proration.

The tender offer will expire at 11:59 p.m. ET on March 19.

Rafaella expects to fund the offer with cash on hand and borrowings that will be available once it closes on its amended credit agreement with HSBC Bank USA, NA. The company's controlling stockholder or its affiliate will participate in the amended credit agreement by providing up to $10 million in a senior secured term financing.

The company has entered into the amended credit agreement, but the agreement will not close unless the company purchases notes under the tender offer by April 2.

The tender offer is conditioned on at least the minimum tender amount of notes being tendered within the price range and other conditions.

Lazard Middle Market LLC (212 758-8575) is the dealer manager. MacKenzie Partners, Inc. (800 322-2885 or 212 929-5500) is the information agent.

Rafaella makes women's career and casual sportswear separates and is based in New York.

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